April 13, 2011

China to sell three million tonnes of soy reserves

China, the world's top soy importer, will sell three million tonnes of domestic soy from state reserves to crushers at a below-import price of RMB3,500 (US$535)/tonne, part of Beijing's efforts to cool food price rises.

But unlike the previous state soy auctions when Beijing set unattractive prices, traders said the offering price to major crushers this time was attractive for those along coastal areas that normally buy imports.

"We believe some crushers (in the coastal areas) may be interested. The price is about RMB200 (US$31)/tonne cheaper than current Brazilian soy prices," said one trading manager.

Traders said some crushers plan to defer some of their soy shipment but are having difficulty doing so.

The sale could hurt buying interest by crushers for South American soy for July and August shipment because soy plants have not fulfilled their needs for these months, said the trading manager.

Another trading manager confirmed the volume and price and said the amount of soy would be sold to 5-6 crushers that have been asked by Beijing to cap retail prices of soyoil at some RMB1,000 (US$153)/tonne lower than current market prices.

"It is partly because of the political task of bringing down inflation, while the soy from 2008 harvest has been stored for quite some time and the government wants to sell them before summer," said another trading manager.

The sale follows Beijing's orders to crushers, which have 80% of the retail market, to extend a price cap that has been in place since December.

Besides soy, Beijing has regularly sold state rapeseed oil reserves, which have pressured domestic edible oil prices and eaten into profits of soy plants.